Monday, 19 November 2012

China department stores wheel out the big guns in war against e-commerce

Traditional department stores in China are flexing their muscle to regain their place on the retail battlefield, as the breakneck growth of e-commerce takes its toll.

The risks faced by brick-and-mortar retailers have recently been amplified by a string of somber sales figures, especially after online vendors, fueled by the Singles' Day bonanza on Nov. 11, delivered an enviable performance over the past weekend.

A department store in Zhengzhou, capital of Henan province, offers a 52-percent discount on Nov. 11, Singles' Day, to compete with e-commerce giants such as Alibaba Group Holding Ltd. that used the occasion to promote their sales with deep price cuts.

That day, e-commerce giant Alibaba Group Holding Ltd. alone generated 19.1 billion yuan (US$3.06 billion) in sales, triple the combined revenue of around 5,000 retail outlets in Shanghai during the eight-day National Day holidays in early October.

During the holidays, from Sept. 30 to Oct. 7, the nation's 100 major retailers saw their sales increase by 8.49 percent year-on-year, according to China National Commercial Information center.

This was a rare occurrence of growth since the introduction of the Golden Week more than a decade ago.

But problems are likely to loom larger for traditional retailers as online merchants sprint ahead. Driven by an urgent desire to boost their sales, stores are jostling to offer the deepest discounts to drum up consumer interest.

Feeling the pinch due to the e-commerce boom, Hong Kong-headquartered New World Department Store China Ltd. has stepped up promoting its annual discount gala in Shanghai more than a month earlier than previous years.

Likewise, the three outlets of Pacific Department Store Co. Ltd. in Shanghai plan to knock up to 50 percent off women's sweaters and offer special discounts on jewelry and cosmetics.

According to the company, the 17-day promotion aims to expand its consumer base and retain customers by encouraging shoppers to register for a membership card that entitles them to discount coupons.

The move is, put bluntly, to tackle the growing challenges posed by the exploding development of e-commerce, said Yan Chengda, deputy general manager of the company.

“Clothes are generally the least immune items to pressure from the thriving online business, so we are offering deep discounts,” Yan added.